AEM Releases November 2012 Flash Report

Total unit sales are slightly above both the five-year average and sales in the past three years.

For the month of November 2012, total two-wheel drive tractor sales were up 9.6% compared with data from 2011. Four-wheel-drive tractor sales were up nearly 30% compared with 2011, while combine sales fell by 1.3%.

A year-to-date comparison shows total farm tractor sales are up 10% and combine sales are down less than 1%.

Large Ag Equipment in the U.S.

Around 85% of the U.S. combine fleet is 5 years or older.

How Will The Drought Affect Equipment Sales?

(A special report from AEM)

As the lower 48 states experienced the 3rd hottest summer on record and nearly 80% of agricultural land has been affected by the first major drought since 1988, a lot of folks may be wondering what affect this will have on equipment sales.

The short answer is – it may not be as significant as many think.

First, a major driver of equipment sales is farm income. When we look at past droughts, the impact on farm income has been minimal, even in years where crop insurance was carried by only a minority of farmers (18% in 1988 versus 84% today).

Second, income isn’t the only factor. Since much equipment is financed, availability of credit, with farmers’ eligibility to get credit and their ability to pay all are factors.

The USDA states that farm equity is forecast to reach an all-time high while real estate debt declines. Debt repayment capacity utilization (DRCU)—a measure of farm exposure to financial risk—is forecast to be at its lowest since 1970.

This last item, as you can see from the chart in the lower right, was a factor in the farm crisis in the 1980’s. Essentially there was too much debt and too little income to service it. That is not the case today.

Our own survey results confirm that the credit crunch of '09 has eased. Less than 10% of members report hearing of problems obtaining credit.

While the future is hard to predict, there is little reason to expect equipment sales to be negatively affected by the drought of 2012.